Fannie Mae and Freddie Mac, the two mortgage giants, “should be abolished”.

Of course. But who says so now?

No other than their greatest champion through the many years of their corrupt practices – Representative Barney Frank.

It was because Barney Frank defended Fannie and Freddie from investigation and oversight that the subprime mortgage disaster pitched the world into economic crisis.

That is why Barney Frankbears a personal responsibility for the recession and the debt Americans have to bear.

Okay, he’s not the only one to blame, but he’s one of the most guilty, along with Presidents Carter and Clinton, and Senator Chris Dodd.

From our post Moment of decision, Sept 29, 2008:

Jimmy Carter, 1977. The Community Reinvestment Act. Banks must make loans to high-risk borrowers.

Bill Clinton, devotee of multiculturalism, pressed for more home-ownership by those who could not afford it, minorities and in effect even illegal immigrants, and Fannie Mae and Freddie Mac responded, buying up hundreds of billions of dollars of the bad loans and sellng them on the world markets.

It was liberal Democrats, led by Senator Christopher Dodd and Congressman Barney Frank, who for years – including the present year – denied that Fannie Mae and Freddie Mac were taking big risks that could lead to a financial crisis.

It was Senator Dodd, Congressman Frank and other liberal Democrats who for years refused requests from the Bush administration to set up an agency to regulate Fannie Mae and Freddie Mac.

It was liberal Democrats, again led by Dodd and Frank, who for years pushed for Fannie Mae and Freddie Mac to go even further in promoting subprime mortgage loans, which are at the heart of today’s financial crisis.

Judicial Watch uncovered documents in 2009 that showed that members of Congress for years were aware that Fannie Mae and Freddie Mac were playing fast and loose with accounting issues, risk assessment issues and executive compensation issues, even as liberals led by Rep. Frank continued to block attempts to rein in the two Government Sponsored Enterprises (GSEs)… Frank received $42,350 in campaign contributions from Fannie Mae and Freddie Mac between 1989 and 2008. Frank also engaged in a relationship with a Fannie Mae Executive while serving on the House Banking Committee, which has jurisdiction over Fannie Mae and Freddie Mac.

Obama blamed Wall Street and the banks for the crisis, and did nothing to stop the real culprits. Instead of shutting down Fannie and Freddie, he made its easier for them to carry on undermining the economy.

[Fannie Mae and Freddie Mac], which together own or guarantee over one half of home mortgages, and which had previously been injected with a $111 billion bailout, received an unexpected Christmas present from the Obama Administration: an executive order, issued in the dark of the night … The Treasury announced they were eliminating the $400 billion limit available to these two entities – in essence giving them license to fritter away as much money as they want while the American people (and their grandchildren) pick up the tab …

What seems to be missing is major reform of the lending practices. There’s no evidence that they’ve become more vigilant in their loan procedures, or more attentive to the credit-worthiness of the borrowers. In fact, it seems pretty clear that they have resumed their lending habits of old.

Proportional fault has never been placed on Fannie Mae and Freddie Mac for the subprime loan crisis.

Because these entities have been protected by Barney Frank in the House and Christopher Dodd in the Senate, the two lenders have escaped the kind of brutal public scrutiny visited upon banks and other lenders. While bankers have been on the hot seat and skewered by late night comedians, the people who run these behemoths have escaped unfazed.

And now it is Barney Frank, of all people, who want them to be abolished.

After years of dissembling and denial, Rep. Barney Frank has finally come out. He now says bankrupt government mortgage giants Fannie Mae and Freddie Mac “should be abolished.” Better late than never.

‘There were people in this society who for economic and, frankly, social reasons can’t and shouldn’t be homeowners,” Frank said in an interview with the Fox Business Network and sounding a lot more like an elephant than a donkey. “I think we should, particularly, stop this assumption that you put everybody into homeownership.”

Barney Frank said that?

(What else is happening today? Are pigs flying? Is the Pope denouncing Christianity? Is Obama siding with America?)

After years of blaming heartless Republicans and Wall Street for the crisis caused by Fannie Mae and Freddie Mac — and their predominantly Democratic supporters in Congress — it’s refreshing to hear a member of the Democratic Party admit his mistakes.

It’s especially true of Frank, who, more than any other elected official, championed the cause of the government-sponsored enterprises Fannie Mae and Freddie Mac. Indeed, Frank is most responsible for stopping GSE reform in the early 2000s, at a time when such a move might have prevented the financial meltdown. …

In 2000, when Rep. Richard Baker proposed more oversight for the GSEs, Frank called concerns about Fannie and Freddie “overblown,” claiming there was “no federal liability whatsoever.”

In 2002, again, Frank said: “I do not regard Fannie Mae and Freddie Mac as problems. I regard them as assets.”

In 2003, he repeated himself in opposing reform, saying he did not “regard Fannie Mae and Freddie Mac as problems.”

Even after a multibillion dollar accounting scandal hit Freddie Mac just a month after those remarks, Frank insisted nothing was wrong. “I do not think we are facing any kind of crisis,” he said.

By 2004, Fannie had its own accounting scandal. Frank again insisted it posed no threat to the U.S. Treasury. …

As late as 2008, after the tide of losses and foreclosures washed away Fannie’s and Freddie’s remaining capital, Frank was adamant that it was all Wall Street’s fault: “The private sector got us into this mess … the government has to get us out of it.”

Of course, he had it exactly backward. We’ve already spent $148 billion of taxpayer money on the two losers. The Congressional Budget Office estimates it will ultimately cost taxpayers $389 billion to bail them out. Even that may be too little; at least one private estimate put the final toll at $1 trillion. …

We’ve spent a lot of money for Barney Frank’s education in financial reality. Today, he’s basically saying he and his party were wrong all along.

That’s a good start. But how about an apology? Or even a frank admission that his party’s indefatigable support of Fannie and Freddie — which, prodded by the Community Reinvestment Act, created and funded the massive subprime market that later collapsed — was to blame for our multitrillion dollar meltdown and the loss of millions of jobs? …

Let’s get government out of the business of encouraging homeownership, an undertaking at which it has failed miserably.

Investor’s Business Daily reports that Alan Greenspan “gets it” – which should not come as a surprise considering he was Chairman of the Federal Reserve for nearly 20 years – and recaps what happened that made America and the world poorer.

Testifying before the Financial Crisis Inquiry Commission, the former Fed chairman told some plain truths he didn’t dare utter when he headed the central bank. Most notably, Greenspan implied it was Congress’ meddling incompetence — not the Fed, or free markets, or greedy bankers — that created the financial meltdown. …

It wasn’t the Fed that caused the housing crash and financial meltdown. It was Congress and the White House.

The mess began in the 1970s when, during the Carter administration, left-wing activists attacked banks for supposed “redlining” practices that let them discriminate in making home loans.

In response, Congress passed the Community Reinvestment Act, which gave regulators the power to force banks to lend money to “low-income, minority, and distressed neighborhoods.”

To fund all this new lending, they used two little-known government-sponsored enterprises — Fannie Mae and Freddie Mac — and essentially rewrote credit standards for the banks,weakening them substantially. Banks made loans, then Fannie and Freddie bought them — using borrowed money to do it.

In this environment, credit ratings no longer mattered much. Neither did having a job or a steady income. What mattered was race.

The process got supercharged in 1992, when a Democrat-led Congress pushed Fannie and Freddie to buy even more mortgages from banks that had made loans to low-income and minority buyers. In 1996, President Clinton’s Department of Housing and Urban Development told Fannie and Freddie that 42% of their financing had to go to those with incomes below the median.

We’re still paying for that today. Fannie and Freddie have gotten a blank check from the government for their losses, and still owe more than $5 trillion that they can’t pay off.

We’ve been critical of Greenspan in the past, but on this, he’s completely right. The biggest villain in the whole financial meltdown isn’t the “private sector,” as some in Congress — like Rep. Frank — have tried to claim. It’s Congress itself.

Shouldn’t those responsible, notably Chris Dodd and Barney Frank, be made to answer for the world-size wreck? What they’ve done to the economy makes Bernie Madoff’s crooked scheme look paltry.

If it’s not to find who is guilty, so that the culprits may be consigned to their just deserts, what is a Financial Crisis Inquiry Commission for?

Rep. Darrell Issa of California has released a report that shows how Democrats in power caused the depression that has spread through the world. It demonstrates how the pursuit of ‘social justice’ can bring economic disaster. And how the worst sufferers from the break-down of the free market will be precisely those for whom the whole ill-advised policy was implemented in the first place.

• Wall Street firms, homebuilders and the GSEs used money, power and influence to block attempts at reform. Between 1998 and 2008, Fannie and Freddie spent over $176 million on lobbyists.

• In 2006, Freddie paid the largest fine in Federal Election Commission history for improperly using corporate resources to hold 85 fundraisers for congressmen, raising a total of $1.7 million.

As the Issa report points out, “the real tragedy of the government’s affordable housing policy is the impact on average Americans, particularly those of modest means. Millions of these borrowers, who were supposed to have been helped by federal affordable housing policy, have now been forced into delinquency and foreclosure, destroying their asset base, their credit, and in some cases their families.”

Rep. Barney Frank, the Democrat who sits atop Congress’ efforts to deal with the financial crisis, has enough chutzpah for 100 politicians — which is saying a lot.

In comments before testimony from both Treasury Secretary Tim Geithner and Fed chief Ben Bernanke Tuesday, Frank said he wants to regulate pay on Wall Street — even for companies that aren’t getting bailouts.

And he called retention bonuses — a time-honored practice on Wall Street and elsewhere in America in which key employees are compensated for their enormous value — "extortion" and "bribes."

Frank, one of the chief architects of the housing mess that’s brought us so low, isn’t satisfied merely with pretending he and his Democratic pals aren’t to blame for all this. No, exploiting voter anger over the now-infamous AIG bonuses, he also wants to dictate to American capitalism what it can earn and what it can’t.

This is the kind of thing that normally happens in Third World countries ruled by tinhorn dictators, or in fascist states, where the democratic rule of law has collapsed. Not the U.S.

Yet, that’s where we find ourselves today, isn’t it? Democrats in Congress, who steadfastly rejected virtually all efforts to reform Fannie Mae and Freddie Mac as they went on the wildest, most irresponsible lending binge in the history of finance, now pose themselves as the saviors of fallen capitalism.

The hypocrisy is nothing short of stunning.

Take Frank. As we’ve written before, he spearheaded congressional Democrats’ efforts in 1992, 2000, 2002, 2003 and 2005 to block reform of Fannie and Freddie.

Those two "government-sponsored enterprises" were the nexus of this crisis, holding $5.4 trillion of the $12 trillion in U.S. mortgages, while originating or funding 90% of the subprime market.

Their failures presaged the subsequent financial meltdown from which we’re still trying to regain our economic footing.

Then there’s Sen. Chris Dodd of Connecticut, another posturing moralist in the flap over AIG bonuses. He turns out to have inserted the bonuses into the bailout legislation in the first place.

An innocent move? Please note Dodd was No. 1 on the list of recipients of AIG’s political contributions. Also that his wife was a former director of IPC Holdings, a company controlled by AIG.

We wish all this tinkering with the private sector was limited to Congress. But it isn’t. The Treasury wants what the Washington Post called Tuesday "unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy."

Citing the AIG precedent, White House spokesman Robert Gibbs defended this radical move, saying on CNN, "We need resolution authority to go in and be able to change contracts, be able to change the business model, unwind what doesn’t work."

Breathtaking. Coupled with the vast expansion of government spending over the next 10 years, this is socialism, pure and simple.

Yes, we know it’s unfashionable to use the "S" word. But we’re willing to be unhip in the service of the truth.

It’s a frightening thing to see a once mighty, and free, capitalist economy placed under the heel of an incompetent government. But that’s precisely what’s happening now.

Executive pay, the focus of much public fury right now, is only the start. Your pay will be next, rest assured. So hold on to your wallets, sure, but also hold on even tighter to something even more precious that now seems at risk: your freedom.

Rep. Barney Frank, the Democrat who sits atop Congress’ efforts to deal with the financial crisis, has enough chutzpah for 100 politicians — which is saying a lot.

In comments before testimony from both Treasury Secretary Tim Geithner and Fed chief Ben Bernanke Tuesday, Frank said he wants to regulate pay on Wall Street — even for companies that aren’t getting bailouts.

And he called retention bonuses — a time-honored practice on Wall Street and elsewhere in America in which key employees are compensated for their enormous value — "extortion" and "bribes."

Frank, one of the chief architects of the housing mess that’s brought us so low, isn’t satisfied merely with pretending he and his Democratic pals aren’t to blame for all this. No, exploiting voter anger over the now-infamous AIG bonuses, he also wants to dictate to American capitalism what it can earn and what it can’t.

This is the kind of thing that normally happens in Third World countries ruled by tinhorn dictators, or in fascist states, where the democratic rule of law has collapsed. Not the U.S.

Yet, that’s where we find ourselves today, isn’t it? Democrats in Congress, who steadfastly rejected virtually all efforts to reform Fannie Mae and Freddie Mac as they went on the wildest, most irresponsible lending binge in the history of finance, now pose themselves as the saviors of fallen capitalism.

The hypocrisy is nothing short of stunning.

Take Frank. As we’ve written before, he spearheaded congressional Democrats’ efforts in 1992, 2000, 2002, 2003 and 2005 to block reform of Fannie and Freddie.

Those two "government-sponsored enterprises" were the nexus of this crisis, holding $5.4 trillion of the $12 trillion in U.S. mortgages, while originating or funding 90% of the subprime market.

Their failures presaged the subsequent financial meltdown from which we’re still trying to regain our economic footing.

Then there’s Sen. Chris Dodd of Connecticut, another posturing moralist in the flap over AIG bonuses. He turns out to have inserted the bonuses into the bailout legislation in the first place.

An innocent move? Please note Dodd was No. 1 on the list of recipients of AIG’s political contributions. Also that his wife was a former director of IPC Holdings, a company controlled by AIG.

We wish all this tinkering with the private sector was limited to Congress. But it isn’t. The Treasury wants what the Washington Post called Tuesday "unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy."

Citing the AIG precedent, White House spokesman Robert Gibbs defended this radical move, saying on CNN, "We need resolution authority to go in and be able to change contracts, be able to change the business model, unwind what doesn’t work."

Breathtaking. Coupled with the vast expansion of government spending over the next 10 years, this is socialism, pure and simple.

Yes, we know it’s unfashionable to use the "S" word. But we’re willing to be unhip in the service of the truth.

It’s a frightening thing to see a once mighty, and free, capitalist economy placed under the heel of an incompetent government. But that’s precisely what’s happening now.

Executive pay, the focus of much public fury right now, is only the start. Your pay will be next, rest assured. So hold on to your wallets, sure, but also hold on even tighter to something even more precious that now seems at risk: your freedom.

It’s hard to believe Barack Obama would even think of calling this change.

Take a good look at some of the 17 people our nation’s president-elect chose last week for his Transition Economic Advisory Board. And then try saying with a straight face that these are the leaders who should be advising him on how to navigate through the worst financial crisis in modern history.

First, there’s former Treasury Secretary Robert Rubin. Not only was he chairman of Citigroup Inc.’s executive committee when the bank pushed bogus analyst research, helped Enron Corp. cook its books, and got caught baking its own. He was a director from 2000 to 2006 at Ford Motor Co., which also committed accounting fouls and now is begging Uncle Sam for Citigroup- style bailout cash.

Two other Citigroup directors received spots on the Obama board: Xerox Corp. Chief Executive Officer Anne Mulcahy and Time Warner Inc. ChairmanRichard Parsons. Xerox and Time Warner got pinched years ago by the Securities and Exchange Commission for accounting frauds that occurred while Mulcahy and Parsons held lesser executive posts at their respective companies.

Mulcahy and Parsons also once were directors at Fannie Mae when that company was breaking accounting rules. So was another member of Obama’s new economic board, former Commerce Secretary William Daley. He’s now a member of the executive committee at JPMorgan Chase & Co., which, like Citigroup, is among the nine large banks that just got $125 billion of Treasury’s bailout budget.

There’s More

Obama’s economic crew might as well be called the Bailout Bunch. Another slot went to former White House economic adviser Laura Tyson. She’s been a director for about a decade at Morgan Stanley, which in 2004 got slapped foraccounting violations by the SEC and a month ago got $10 billion from Treasury.

That’s not all. There’s Penny Pritzker, the Obama campaign’s national finance chairwoman. She was on the board of the holding company for subprime lender Superior Bank FSB. The Chicago-area thrift, in which her family held a 50 percent stake, was seized by the Federal Deposit Insurance Corp. in 2001. The thrift’s owners agreed to pay the government $460 million over 15 years to help cover the FDIC’s losses.

Even some of the brighter lights on Obama’s board, like Warren Buffett and former SEC Chairman William Donaldson, come with asterisks. Buffett was on the audit committee of Coca-Cola Co.’s board when the SEC found the soft-drink maker had misled investors about its earnings. Donaldson was on the audit committee from 1998 to 2001 at a provider of free e-mail services called Mail.com Inc. Just before he left the SEC, in 2005, the agency disciplined the company over accounting violations that had occurred on his watch.

So, by my tally, almost half the people on Obama’s economic advisory board have held fiduciary positions at companies that, to one degree or another, either fried their financial statements, helped send the world into an economic tailspin, or both.

We’ve noted many times that John McCain was one of the prescient legislators who saw the dangers posed by the runaway Freddy Mac and Fannie Mae and tried to do something about the problem. Until now, though, I’d never seen this letter of May 5, 2006, signed by McCain and 19 other Senators, that couldn’t have been clearer about the dangers posed by the Democrats’ reckless treatment of Fannie and Freddy, and the need to take action to protect the taxpayers and the economy. It’s hard to see how any warning could be more spot-on. Click to enlarge:

Among the more prescient observations:

We are concerned that if effective regulatory reform legislation for the housing-finance government-sponsored enterprises (GSEs) is not enacted this year, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddy Mac pose to the housing market, the overall financial system, and the economy as a whole. …

Today, almost half of the home mortgages in the U.S. are guaranteed by these GSEs. They are mammoth financial institutions with almost $1.5 Trillion of debt outstanding between them. With the fiscal challenges facing us today (deficits, entitlements, pensions and flood insurance), Congress must ask itself who would pay this debt if Fannie or Freddy could not? …

It is vitally important that Congress take the necessary steps to ensure that these institutions benefit from strong and independent regulatory supervision, operate in a safe and sound manner, and are primarily focused on their statutory mission. More importantly, Congress must ensure that the American taxpayer is protected in the event either GSE should fail.

Via Human Events. One thing I hadn’t realized is that McCain’s reform legislation was passed through the Senate Banking Committee, but was not able to gain majority support on the Senate floor. All twenty Senators who signed the letter calling attention to the urgency of reforming Fannie Mae and Freddy Mac were Republicans. After May 2006, the Democrats continued to use Fannie and Freddy as their private slush funds until the inevitable collapse, which McCain had warned against so eloquently, occurred.

For some inexplicable reason, John McCain seems unable to claim the credit he deserves for being one of the few politicians in Washington who saw the present crisis coming and tried to do something about it. He is even more unable to vigorously and unambiguously put the blame where it belongs: on the Democratic Party. Which is one of the principal reasons why, as everyone expects, he will lose in November.

It was liberal Democrats, led by Senator Christopher Dodd and Congressman Barney Frank, who for years– including the present year– denied that Fannie Mae and Freddie Mac were taking big risks that could lead to a financial crisis.

It was Senator Dodd, Congressman Frank and other liberal Democrats who for years refused requests from the Bush administration to set up an agency to regulate Fannie Mae and Freddie Mac.

It was liberal Democrats, again led by Dodd and Frank, who for years pushed for Fannie Mae and Freddie Mac to go even further in promoting subprime mortgage loans, which are at the heart of today’s financial crisis.

Alan Greenspan warned them four years ago. So did the Chairman of the Council of Economic Advisers to the President. So did Bush’s Secretary of the Treasury, five years ago.

Yet, today, what are we hearing? That it was the Bush administration "right-wing ideology" of "de-regulation" that set the stage for the financial crisis. Do facts matter?

We also hear that it is the free market that is to blame. But the facts show that it was the government that pressured financial institutions in general to lend to subprime borrowers, with such things as the Community Reinvestment Act and, later, threats of legal action by then Attorney General Janet Reno if the feds did not like the statistics on who was getting loans and who wasn’t.

Is that the free market? Or do facts not matter?

His article also deals with how Obama benefited from Fannie Mae. He concludes:

The country does not deserve to be put in the hands of a glib and cocky know-it-all, who has accomplished absolutely nothing beyond the advancement of his own career with rhetoric, and who has for years allied himself with a succession of people who have openly expressed their hatred of America.

Here’s how James B. Lockhart III, head of the Office of Federal Housing Enterprise Oversight, described the two companies back in 2006, before the meltdown occurred:

"The result of (Fannie’s and Freddie’s) rapid growth unconstrained by market forces and a weak regulator was years of mismanagement, flagrant earnings manipulation, and systems-and-controls problems. Managements of both companies were forced out, earnings were misstated by an estimated $16 billion, fines exceeding one-half billion dollars were imposed, and remedial costs will exceed $2 billion."

Yet Congress did nothing. Fannie and Freddie continued to enjoy a virtual monopoly of the housing finance market, holding nearly half the nation’s $12 trillion in mortgage assets in 2007.

And what happened to Fannie’s and Freddie’s top executives, almost all with deep ties to the Democratic Party? Did they get perp-walked to prison like WorldCom’s Bernie Ebbers, Tyco’s Dennis Koslowski, Adelphia’s John Rigas, ImClone’s Sam Waksal, or any of the others who did time for corporate misdeeds in the early 2000s?

No. Jim Johnson, former Walter Mondale aide, became head of Barack Obama’s vice presidential search committee. Franklin Raines, who headed Fannie from 1998 to 2004, the years of its worst excesses, pocketed nearly $100 million in pay and bonuses from Fannie. He, too, became an adviser to Obama.

Other Fannie-Freddie alumni did equally well. Rep. Rahm Emanuel has been front and center in crafting a new rescue bill. Ex-Clinton Justice official Jamie Gorelick careens from career catastrophe to catastrophe, and still gets top jobs. It pays to have ties.

As such, any investigation into Fannie and Freddie must include Congress, both current and past.

There’s lots of evidence that the two mortgage giants had become little more than taxpayer-guaranteed front companies for Democrats, who used them to reward supporters with cheap loans and to provide jobs for out-of-work politicians.

Jimmy Carter. 1977. The Community Reinvestment Act. Banks must make loans to high-risk borrowers. Opened door for ACORN (see earlier posts) to force banks to make sub-prime loans to uncreditworthy borrowers.

Barack Obama. Trained staff for Madeline Talbott, ‘key pioneer of ACORN’s subprime racket’ as Stanley Kurtz calls her, to run her ‘subprime-loan shakedown racket’. ACORN employed him as its lawyer. And he funded it through the Woods Fund and indirectly through the Chicago Annenberg Challenge. In three years in the Senate, Obama received more contributions from Fannie Mae and Freddie Mac than anyone else save Dodd, who got his contributions from them over eleven years. He appointed two Fannie Mae CEOs as advisors to his campaign.

Bill Clinton, devotee of multiculturalism, pressed for more home-ownership by those who could not afford it, minorities and in effect even illegal immigrants, and Fannie Mae and Freddie Mac responded, buying up hundreds of billions of dollars of the bad loans and sellng them on the world markets.

Harry Reid. In 2005 when John McCain sponsored a Fannie-Freddie reform bill, he led the Democrats in crushing it. Fannie and Freddie were created by Democrats and Democrats are most responsible for their failure.

McCain has repeatedly called for reforming Fannie and Freddie. President Bush – whose administration is being blamed for the crisis by Frank, Dodd, Reid etc – urged their reform 17 times this year. The irony of Bush and the Republicans being blamed now for the catastrophe the Democrats’ so insistently brought about!

The cure now is not more socialism, not more government control of the market, not the election of the most socialist-minded candidate for the presidency ever – Barack Obama.

If America elects Obama, it will be choosing socialism, and socialism has failed wherever it has been tried.

America needs to choose capitalism at this moment in history, to save itself and to give hope to the wider world. Otherwise this crisis will be turned into an American and world-wide disaster from which there may be no foreseeable return.